What We Know About the U.S.-Based Oil Sector Appointments

The announcements:

On February 13th, the National Assembly agreed to designate an ad-hoc administration board with the power of acting on behalf PDVSA to take control of PDV Holding Inc., CITGO Holding Inc. and CITGO Petroleum Corporation, and appointed the following board members:

Who they are

All of them, except David Smolansky, are respected and experienced professionals from the oil industry, the international finance and the academics, living in the U.S.

Smolansky, a Caracas-area mayor persecuted by the Maduro regime and exiled in the U.S., is one of the key political players at this moment regarding the liaison between the Venezuelan National Assembly, the Trump administration, and the OAS.

Luisa Palacios, appointed head of CITGO, has a master’s degree in International Affairs from Columbia and a Ph.D. in the same area from Johns Hopkins University. She’s a specialist in energy policy and has worked at Procter & Gamble, Japan Bank for International Cooperation, Société Générale, Barclays Capital and Medley Global Advisors.

Luis Urdaneta was PDVSA’s executive vice-president until 1998. Angel Olmetta was director of operations at CITGO in the 90s. Edgar Rincón is the senior vice-president of operations for the Western Hemisphere at Houston-based Nabors Industries. Rick Esser is the current CITGO chief strategic officer and vice-president of compliance, under the Maduro administration. He’s a U.S. citizen.

What could happen now

Their mission is to achieve control over CITGO, with the help of the government of the country where the company is based, and to protect these resources from further pillaging by chavismo. Gaining control of CITGO doesn’t mean that the Guaidó administration will be funded. At least not if they manage it responsibly, how it should be.

Actually, Carlos Vecchio, the interim government’s envoy to the U.S., said that they do not plan to use CITGO money in the short term. “It belongs to Citgo. We want Citgo in financial health and for operations to continue, and for that money to stay there for when we are able to take effective control of power and the state’s institutions, including PDVSA.”

It is key that when they have full access to CITGO, a comptroller and auditors be engaged in keeping those books as clean as possible for two main reasons: a. Remember that CITGO, a company established and operating in the U.S., is subject to a higher standard of control and anti corruption practices than poor old PDVSA (that’s why PDVSA was used by chavismo as an ATM and Citgo as collateral when asking for more loans); and b. well, if you want to differentiate yourself from chavismo you can’t act like chavismo.

In any case, we can expect that none of this will happen overnight. Although it will be probably faster than recouping frozen assets abroad or gaining access to foreign PDVSA accounts, since this is a sort of corporate cese de usurpación.

We can expect a legal battle looking to win some time for chavismo to find a way to bypass the inevitable. The board members loyal to Maduro started to work from an office in the Bahamas to avoid the U.S. measures derived from the acknowledgment of Juan Guaidó as caretaker president, and they will fight to retain the control of such a strategic asset, against the board appointed by the National Assembly and supported by the U.S. Maduro, however, seems to be running out of options, especially after the U.S. Department of the Treasury blocked PDVSA assets in the U.S. with the intention that invoices to CITGO would be paid in accounts controlled by the legitimate government.

The financial front has its own enormous challenges: CITGO is not only in shambles, as the whole Venezuelan oil industry, but its shares are also disputed by Russian Rosneft. “I wouldn’t be surprised by a strategy via Chapter 11 plus renegotiation, to impede that PDVSA creditors take control of CITGO”, says oil specialist José De la Rosa.

In any case, on strategic terms, this is one of the most critic developments about the power struggle around Venezuela. The following weeks will produce critical news on this front.

Caracas Chronicles is 100% reader-supported. Support independent Venezuelan journalism by making a donation.